I bought my first Bitcoin last week … so expect the market to collapse!

My investment track record has been patchy, to put it mildly. In fact, savvy investors can make a fortune by watching my choices … and then doing the diametric opposite.  

I stuck a fair bit of change into BP just before the Deepwater Horizon oil spill. I ploughed into bank shares on the eve of the financial crisis.  There’s a long list of blue chip firms such as 3i who’ve issued their first-ever profit warnings a few days after I’ve decided to back them. And I must be one of the few people ever to lose out throwing a few bob the way of superwomen Nicola Horlick (I was a shareholder in her company Bramdean Asset Management, which lost one-third of their value when it emerged that she’d placed ten per cent of the fund with ponzi culprit Bernie Madoff).

So any Bitcoin investor should feel a chill up their spine at the news that, this week, I took the plunge into the world of crypto currencies.  

For the uninitiated, I can reveal the process is far from straightforward.  

I’ve had deep immersion into the weird and wonderful world of crypto exchanges, digital wallets, and BTC Vaults.  I’ve also seen the cautionary stories of Bitcoin investor who, cavalier about passwords, are unable to lock their accounts – one of the most notorious being Stefan Thomas, a German-born programmer living in San Francisco, who revealed in January he had only two remaining guesses to access 7,002 bitcoins (valued in January at $220 million) on his IronKey secure hard drive. 

One estimate suggests that as many as 20% of existing bitcoins are lost or otherwise stranded in inaccessible wallets.

On this occasion, I did enjoy one rare competitive advantage. One of my sons started dabbling in crypto currencies a few years ago – in fact, putting almost his entire summer earnings from an internship in Brighton into Bitcoin. So he was able to share his expertise – whilst making the cutting but not inaccurate side comment that, “if my boomer parents are getting in, that’s probably time for me to get out.”

Today Bitcoin comprises over half of the total market capitalisation ($1.7 trillion) of all crypto currencies. 

In recent days the price of a single Bitcoin has soared above $50,000, up 65 per cent in a single month, and worth more than the value of all roubles in circulation as well as the value of any individual company with the exception of Apple, Amazon and a couple of the other tech giants. 

A driver of this growth has been evidence that the crypto currency is gaining acceptance amongst mainstream investors and companies – Tesla, Mastercard and BNY Mellon have all embraced it in one form or another, although Elon Musk did tweet a couple of days ago that the price of Bitcoin and Ethereum “seem high”. A cryptic comment in more ways than one!

One of Bitcoin’s most alluring attractions is as a more sound ‘store of value’ than conventional currencies, the latter being forever subject to the scourge of inflation at the whim of finance ministers and central banks, who have the power to meddle in the volume of notes in circulation for short-term political gain. In theory Bitcoin is immune to such economic tinkering since the total number of Bitcoins available is defined, not by errant and ill-disciplined politicians, but by the precision of mathematics.  

The theory seems sound; whether it also works in practice is a story that will unfold over the months ahead.  

PS: In the course of writing this article, note the price has risen another couple of per cent; that’s given me a flush of smug satisfaction – similar, I fear, to the Dutch merchants in the 1630s as they watched tulip bulbs being exchanged for 5,500 florins.  Eerily, in today’s money, that equates to $50,000 – the price reached by Bitcoin last week. As history / folklore attests, when the prices turned south, there were a lot of embarrassed punters looking after piles of unwanted bulbs, and unsure whether to dump, burn or plant them!